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Chilled water systems work to cool a room using cold water instead of cold air. The system operates in a similar manner to a refrigerator, but on the scale of a house or building. Pipes run throughout the house circulating cold water throughout to air handlers in each room. These handlers work like a radiator, but instead of steam, cold water is poured over coils inside the handler. A small fan blows air over these coils cooling the air as it moves into the room.

The key to the system is a chiller with an attached water reservoir. The chiller has a thermostat that monitors the temperature of the water in the reservoir, and therefore the rest of the system. If the water temperature rises above a certain level, the chiller kicks in. It cools the water back down with a compressor that raises the pressure of a refrigerant in the system and passes it through an expansion valve which instantly allows it to expand into a gas. The gas is cold and helps to pull heat from the water in the pipes. As the gas warms it condenses and may even become a hot liquid, while the water grows cold and is sent through pipes in the home to handlers.